Energy Market Update August 2016

Alberta

The Alberta Energy Regulator (AER) will release information on the performance of Alberta pipeline operators by early 2017 with plans to release similar information in future years on oil and gas wells and coal operations. Jim Ellis, AER chief executive, states that releasing this information will help to clarify the expectations for the industry which he believes “is going to be really powerful” moving forward. Across the country pipeline safety is in question amidst mega-project negotiations such as the Kinder Morgan Trans Mountain expansion and the TransCanada Energy East pipeline.

The National Energy Board (NEB) has recently come under fire with 59 environmental and social groups calling the pipeline review process “broken” in a letter addressed to Prime Minister Justin Trudeau. The letter calls for the NEB to stop reviewing the controversial Energy East pipeline project until the review process is overhauled. The NEB is in charge of the oil and gas lines that run through multiple provinces while the AER is responsible for smaller system that crisscross Alberta. Moving forward the AER must regain the confidence of the public by being more open with their information which it hopes to do with the upcoming “report cards”. The information released by the AER in the “report cards” will be company specific and will include incident reports per thousand kilometers of line.

Pipeline operators should not be surprised by the upcoming evaluations as pipeline security and monitoring has become a critical issue to both provincial and federal governments. In the past three years, one-third of the 23 cases investigated by the AER it was found improper leak detection to be a significant contributor, highlighting the magnitude of the pipeline safety issue and the role that pipeline operators play in ensuring the safety of the surrounding environment. Ultimately the report cards will help Albertans understand the performance standards and will show them what the regulator will do to step in when there is an issue. (Source: Calgary Herald)

Electricity Prices for Alberta

The Alberta power pool price averaged 1.821 cents per kWh in August 2016. This price is 0.277 cents higher than last month’s average of 1.544 cents per kWh. The pool price has averaged 1.966 cents per kWh over the last 12 months.

As of August 6, 2016, the forward market was predicting electricity prices for the calendar years of 2016, 2017, 2018, 2019 and 2020. These prices are 2.925, 3.15, 3.938, 4.35, and 5.00 cents per kWh respectively.

Gas Prices for Alberta

Direct Energy’s gas rate for August was $2.364 per GJ in the North and $2.634 per GJ in the South. The September rate has been set at $2.351 per GJ in the North and $2.351 per GJ in the South. Alberta gas prices have averaged $2.063 per GJ over the last 12 months.

As of August 5, 2016, the forward market was predicting gas prices for the calendar years of 2016, 2017, 2018, 2019, and 2020. These prices are 2.63, 2.82, 2.84, 2.87, and 2.98 cents per GJ respectively.

British Columbia

In April 2015 the BC government appointed a climate leadership team comprised of members from local businesses and governments, First Nations, environmental groups, and academia to help develop a climate change plan. In November 2015 the Climate Leadership team presented their plan which included 32 recommendations to help reduce carbon and greenhouse gas emissions and other environmental strategies.

On August 19th 2016 the BC government has finally finalized their Climate Leadership Plan after months of delay. The plan outlines BC’s strategies to remain climate leaders in Canada. However, the plan has not been well received by the public, particularly the members of the Climate Leadership team. One member in particular, Tzeporah Berman an environmental activist, went as far as to call the plan “pathetic” stating that she was “disgusted” with the plan that was brought forward.

Berman’s critique comes after none of the 32 recommendations made by the Climate Leadership team were implemented in full. Mary Polak, the BC Environment Minister, has responded to the critiques saying that the plan released on August 19th is just “the first step in a more comprehensive plan that will be developed after meetings with the federal and other provincial governments”. Polak says that although she understands Berman’s disappointment she points outs that 18 of the recommendations were addressed and partially implemented into the plan.

One of the biggest criticisms of the plan is the fact that the carbon tax will not be increased even though the climate leadership team recommended an increase. Josh McNab from the Pembina Institute, believes that without increasing the carbon tax BC will fall behind other provinces and will no longer be a climate leader. Polak defends the government’s decision to keep the carbon tax the same explaining that increasing it could have repercussions on the provincial economy and stated that even without increasing the carbon tax BC is still “firmly in the lead” in carbon pricing. Another point of critique was the rejection of the emissions targets for 2030 as proposed by the Climate Leadership team. Instead, the provincial plan aims, by 2050, to reduce emissions to 80 per cent below the 2007 levels and Polak said that a 2030 target could get added later on after discussions with the federal government and other provinces. Polak also explained that further climate initiatives will be introduced every year as well as this upcoming fall and emphasised that this plan is just the first step in their plans. (Source: CBC News)

Ontario

Source: JASON KRYK / WINDSOR STAR

Ontario’s energy policies were at the forefront during the Association of Municipalities of Ontario conference. The NDP addressed Ontarian concern over rising hydro bills and want to put citizens in the centre of their planning, delivery and management of the hydro system. Andrea Horwath, the leader of the NDP, promised to lower the hydro bills should her party be elected in 2018. She said that HST on hydro bills would be immediately removed lowering hydro bills by approximately eight per cent.

Horwath recognizes that the loss of $800 million a year in revenue for the province is a big loss, she believes that the government must prioritize and help alleviate the pressure that high utility bills put on families. In addition, the NDP promise to stop the privatization of Hydro One which has received a lot of backlash since it started October 2015.

The current Ontario government has plans to sell 60 per cent of the provincial corporation claiming that the province needs the money that will come from the sale. Premier Kathleen Wynne backed up her government’s decision to sell the corporation saying that “in the short- and long-run, that value is better put towards new, productivity-enhancing infrastructure assets”, she believes that the history of Hydro One is not a good enough reason to hold on to it. Wynne also explained that it is not Hydro One that sets the rates but rather the Ontario Energy Board, who will still be in charge of rates when the Hydro One assets are sold. Horwath countered and promised that the NDP will also work to fix the Ontario Energy Board to ensure that it sets rates that will be good for consumers should they be elected in 2018. Horwath believes that the Ontario Energy Board was supposed to be “an organization that protected the interests of the ratepayer and we see today that’s certainly not what’s happening”. (Source: Winsor Star)

Electricity Prices for Ontario

The Hourly Ontario Energy Price (HOEP) was an average of 3.045 cents per kWh in August 2016. This price is 0.953 cents higher than last month’s 2.092 cents per kWh. The weighted-average price was 3.067 cents per kWh during August 2016. The twelve month average was 1.694 cents per kWh up to August 2016.

The second estimate for the Global Adjustment rate for August 2016 was set at 7.05 cents per kWh. This actual rate paid was 8.306 cents in July 2016. The Global Adjustment is an additional charge paid by non-regulated customers. (Source: IESO)

Saskatchewan

Source: SASKPOWER

The I1K transmission line project is finally complete after nearly 4 years, $330 million, and 1.8 million hours of work. The line stretches 300 kilometers to provide more reliable power to residents in northern Saskatchewan from Island Falls to Key Lake. According to Mike Marsh, the President and CEO of SaskPower, the I1K project was one of the most complex in North America due to “challenging terrain, working conditions, unique designs and helicopter construction activities.”

760 towers we added and built on site employing between 250 to 300 people each day. It also required 45 helicopters flying a combined 30,000 hours. The project included 300 kilometers of SaskTel cables to boost the phone company’s network in the north as well as technology to guard against lightning strikes and to keep birds from building nests. In addition, the project employed over 60 companies along with members of the Lac La Rouge Indian Band and the Peter Ballantyne Cree Nation which resulted in more than $60 million being invested in northern businesses. Marsh expressed his gratitude stating that “with the hard work and dedication of our employees, contracted partners and northern communities, we are now able to continue bringing reliable power to the far reaches of the province, for many decades to come.” (Source: The Star Phoenix)

Manitoba

Manitoba Hydro’s net income for the 2015-2016 fiscal year has been reported at $49 million, down $87 million from their revenue of $136 million in 2014-2015. According to Manitoba Hydro a mild winter and an increase in expenses contributed to their loss of revenue. The milder winter resulted in lower revenues, and depreciation related to capital investments as well as other financial costs increased their expenses. In addition, there was a $1 million net loss from the natural gas sector. Electricity export sales helped to balance out the losses with an increase of $31 million representing approximately 20% of the electricity revenues. Manitoba Hydro’s $2.26 billion overall revenue was down $58 million from the previous year and included $37 million from the electricity sector and $9 million from subsidiaries. Beginning in 2020, Manitoba Hydro has signed a 20-year agreement with SaskPower to sell them 100 megawatts of renewable hydropower. (Source: Winnipeg Sun)

New Brunswick

Due to a decrease in the first quarter NB Power revenues, the New Brunswick government has decided to pull out $20 million from their $100 million contingency fund. Treasury Board President Roger Melanson explained that the fund was created to protect them against unforeseen circumstances, which is why they are using some of the money in light of the weakened revenue. According to Melanson the remaining funds will only be used for unexpected costs. If the remaining $80 million is not used then it’ll be put towards lowering the deficit from $342.4 million to $262.4 million.

However, the opposition is quick to criticize the choice to use the money. Blaine Higgs, a Progressive Conservation finance critic, believes that the contingency fund only exists to allow the Liberals to manipulate their numbers. The fiscal update also summarizes the changes that were made for government spending and revenues. In a statement Melanson said that the “first-quarter update reflects new federal funding and related spending for investments in areas like affordable housing, post-secondary institutions, clean water and waste water”.

The government expenses were below budget in the first quarter reflecting their commitment to “manage spending and finances in a diligent manner”. New Brunswick received federal funding for infrastructure funds providing $21.9 million plus another $23.1 million from various federal programs in conditional grants. The fiscal update also shows that, primarily due to the decrease in revenues from NB power, return on investment is down $49.3 million. As of July 1st the Harmonized Sales Tax (HST) was increased by two percentage points up to 15 per cent bringing in a projected $300 million in added revenues. The first quarter results do not include the additional revenue. In 2015-2016 the projected deficit is $466.4 million which includes the $150 million. By the end of the fiscal year the provincial net debt is projected to increase up to $13.4 billion with the government stating that “it is still years away from delivering a balanced budget”. (Source: CBC News)

Prince Edward Island

The Atlantic Chamber of Commerce submitted a discussion document on PEI’s Climate Change and Mitigation strategy in July. The chamber, which represents approximately 1,500 island businesses suggested, among other things, the introduction of a provincial carbon tax. Glenn Davis, the Chamber’s vice-president of policy, explains that close to 80 per cent of the provinces already have their own carbon taxes, and that the federal government is not planning on introducing a federal carbon tax in the near future. Furthermore, for the province it would be better to generate the revenue within the province instead of relying solely on the federal tax. The Chamber also suggests that PEI set more ambitious emissions reduction targets that go beyond what was set by eastern premiers and New England governors a year ago.

Davis says that anything that can help and motivate islanders to make energy efficient decisions, for example rebates for plug-in electric vehicles, is a “positive step”. The Chamber also suggests the province focuses on energy efficiency. But they don’t believe that they need a stand-alone energy efficiency utility and the benefits of the added bureaucracy should be weighed before proceeding with Energy Strategy plan. In addition the Chamber wants to expand the National Building Code to apply province wide, not just in the Charlottetown, Summerside and Stratford areas. In addition, Davis hopes that Ottawa will beef up the standards in the code in regards to energy efficiency requirements. Finally, the Chamber suggests that wind storage be a priority for PEI. Wind energy is cleaner and there are opportunities to invest and explore new technologies, but more storage capability is necessary to be able to supply peak hour demand. Davis believes that one of the economic advantages from climate change is the “green economy” business opportunities, such as wind power. Furthermore, he believes that “The concept of being ahead of the curve and being engaged early on presents the opportunity to be leaders and experts in certain areas of climate change mitigation and adaptation.” (Source: CBC News)

Quebec

The National Energy Board (NEB) headed into Montreal to begin their hearings for the Energy East Pipeline to hear from both supporters and opponents of the pipeline project as it decided whether to approve the project or not. However, in Quebec, the NEB will also be trying to convince the public of the legitimacy of their review process amongst political and popular skepticism. Denis Coderre, the Mayor on Montreal and a vocal opponent of the pipeline project, had doubts of the “impartiality of the process” after questions surrounding meetings between the NEB and former Québec Premier Jean Charest, who has worked for TransCanada, were raised.

Coderre’s concern was echoed by 36 environmental groups, including Greenpeace. The NEB claims that they were unaware that Charest worked for TransCanada at the time, and explained that the meeting was part of a series of meetings held with interested parties before the public hearings started to develop ideas and prepare for the public hearings.

The NEB also met with the environmental group Équiterre and other municipal politicians. Sidney Ribaux, Équiterre’s executive director found the meeting strange as not every intervenor got a chance to meet with NEB members ahead of the public hearings. He speculates that small municipalities and community groups were not given the same privileged of the advance meetings.

At the same time as the NEB’s review process, the Bureau des audiences publiques sur l’environment (BAPE), who has credibility in the eyes of many environmentalists, is also conducting a provincial environmental review of the pipeline project. Their credibility stems from their experience consulting both experts and the public while the NEB was not designed to conduct large-scale public consultations. Federal Environment Minister Catherine McKenna urges Canadians to trust in the system, however the federal government has created and expert panel to review how the NEB approves projects which is sending mixed signals on the trustworthiness of the NEB process. The federal government will make the final decision on the approval of the project based on the recommendation presented by the NEB. (Source: CBC News)

Newfoundland & Labrador

A contract signed between the Churchill Falls Corporation CF(L)Co and Hydro-Québec 47 years ago in 1969 has been upheld by the Québec Court of Appeal. The initial term of the 65 year contract expires on August 31st when a renewal clause will extent it for another 25 years. The case against CF(L)Co rests on the fairness of the original contract which allows Hydro-Québec to purchase nearly all of the power generate at the Churchill Falls plant and sell it to their consumers at a higher price. The new terms, which would go into effect on September 1st, would see Hydro-Québec being entitled to monthly allotments until the end of the contract in 2041. As the new owners of the Churchill Falls Generating Station and the Upper Churchill water rights, CF(L)Co believes that they have the right to “undertake and benefit from the new commercial opportunities” while still fulfilling their agreements with their customers, which includes Hydro-Québec. The decision ruled against CF(L)Co supporting Hydro-Québec’s view that, despite new language in the contract, CF(L)Co “can’t capture more than two fixed blocks of power – worth 300 megawatts and 225 megawatts- for sale to third parties”. CF(L)Co has been ordered to pay $1.3 million in court costs and the 250-page ruling claimed that there was not a convincing enough argument in CF(L)Co.’s favour to change the deal. Nalcor said, in its statement, that the Muskrat Falls project, which has taken on almost $4 billion dollars in debt since its start in 2012, will not be affected by the court ruling. (Source: The Globe & Mail)

Nova Scotia

The National Energy Board of Canada (NEB) has ranked countries in tidal energy capacity with Canada coming in fourth after South Korea, France, and the U.K. However, when it comes to tidal energy generation in Canada, all of it comes from Nova Scotia, meaning that Nova Scotia alone ranks fourth in the world. 20MW of Canada’s total 40MW of tidal energy comes from the Annapolis Tidal Power Plant with the remaining being supplied by Fundy Ocean Research Centre for Energy (FORCE) test site projects developed by Minas Tidal, Black Rock Tidal Power, Atlantis Operations Canada, and Cape Sharp Tidal Venture, all located in Nova Scotia. The Bay of Fundy is recognized as one of the best potential sites for tidal power generation in North America with more than 160 billion tonnes of water being pushed twice daily.

The Minas Passage, a site many companies are trying to develop technologies to tap into, could produce up to 300MW powering up to 100,000 homes. Earlier this summer Cape Sharp Tidal was set to install turbines at the Fundy Ocean Research Centre for Energy (FORCE) which could generate enough electricity to power 1,000 homes. According to research conducted by Acadia University suggests that upwards of 7,000MW could be generated in the Minas Passage with 2,500 or which can be commercially harnessed without damaging the surrounding environment. Renewable energy technology is estimated to be worth $1.7 billion to the province’s economy according to Nova Scotia Energy Minister Michael Samson. (Source: Cantech Letter)

Nunavut

Greenpeace’s icebreaker Arctic Sunrise made its way to Clyde River Nunavut with 27 solar panels to be installed on the community hall’s roof. Residents from the small arctic town all lent hand to help install the panels in 10 days bringing ladders and tools to help the Greenpeace volunteers. The solar panels will help to reduce diesel use in the community and the money saved will be reinvested into youth groups. The community is eager to prove that solar energy is a real possibility in the arctic. The panels will “sleep” when there is no sun and start back up when the first shred of sunlight starts to come through. The community sees 24 hours of sunlight from early May to late July, and approximately seven to eight hours of sunlight in February and October. From mid-November to mid-January there is no sunlight in Clyde River. Overall the solar panels will provide a savings of about $4,500 per year. Since the hall does not have internet connection, someone in the community will have to regularly visit the site to gauge that it is performing as it should. The system will be ready to go by the end of August when Greenpeace leaves the community but will only be up and running after an electrical inspector visits the site to ensure it is up to code which is expected at the end of September. In addition to the solar panels, Greenpeace also brought actor Emma Thompson on the trip to help with installation and local fundraising efforts. (Source: Nunatsiaq Online)

Northwest Territories

Production at the Gahcho Kué diamond mine north of Yellowknife has begun ramping up. The mine is run by the De Beers Group of Companies and Mountain Province Diamonds, a Toronto-based company. Construction at the mine started back in 2013 and is expected to reach full commercial operations by the first quarter of 2017. Over its 12-year lifespan the mine is expected to produce 4.5 million carats of diamonds per year and is the largest new diamond mine in the world. Kim Truter, the De Beers CEO of the company’s Canadian operations hopes that this project will “not only strengthen De Beers in Canada, but ensure Canada remains the third leading diamond producer, by value, in the world,” and stated that De Beers is “excited to see this project move into the production phase and must congratulate our Gahcho Kué team and thank our community partners for helping us deliver this world-class mine.” The project will provide jobs in the region and is expected to increase economic activity which is much needed after the Snap Lake mine was idled late last year by De Beers. The company transferred some employees to the Gahcho Kué site but has only committed to creating positions for 100 out of the 434 laid-off workers. Mountain Province Diamonds hold a 49 per cent stake in the mine and De Beers holds the other 51 per cent. De Beers is primarily owned by Anglo American. The Gahcho Kué diamonds are expected to be on the market by the end of 2017. (Source: Canadian Manufacturing)

Yukon

Yukon Energy Corporation (YEC) has to pay $1.6 million to North America Construction, as ordered by a Yukon Supreme Court for extra work done at the Aishihik hydro plant in 2011. North America Construction, an Ontario based company, filed a claim for compensation of approximately $4 million of additional work that was not in their original contract. YEC counter-sued the company, who was their contractor, for compensation claiming that their work was sloppy and had to be fixed. Justice Gerard Hawco did find that North America Construction hadn’t been of the highest quality, however he believes that YEC’s expectations were “higher than normal.” Hawco wrote that “Certainly the Plaintiff’s work was often sloppy, to put it crudely,” and that, “Their work habit often left YEC’s management frustrated” however, North America Construction did manage to finish the project on time.

YEC decided to install a third turbine at the Aishihik plant in 2009 and in 2010 accepted North America Construction’s offer of $7 million to take on the project. The project was mostly finished by the deadline of November 2011. However the relationship between the two parties deteriorated throughout the project which weighed on the judges final decision. The judge ruled that North America Construction was entitle to $700,000 for the additional work that they did on the project plus another $1.3 million that YEC had already agreed to pay them for that work. Out of the total $2 million North America Construction was entitled to, the judge deducted a total of $408,000 for their faults resulting in a total of approximately $1.6 million to be paid by YEC to North America Construction. In the end, Judge Hawco concluded that both parties suffered from the atmosphere of confrontation that was created throughout the project. (Source: Yukon News)